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AM Best Affirms Credit Ratings of First Net Insurance Company


HONG KONG–()–AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of First Net Insurance Company (First Net) (Guam). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect First Net’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

First Net’s risk-adjusted capitalisation is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and supported by its relatively low net underwriting leverage, and conservative and liquid investment portfolio, both of which partially offset its small absolute capital base. The company has a relatively high reliance on reinsurance for its business growth and catastrophe protection, albeit credit risk is limited due to a stable and high-quality reinsurer panel.

FirstNet’s adequate operating performance is underpinned by positive underwriting results and stable investment returns from its fixed-income portfolio. Its combined ratios mostly outperformed its composite’s average over the past 10 years, but the company’s small net premium base left its underwriting performance more susceptible to potential volatility arising from claims and expenses. The company has faced an additional expense burden since April 2019 when its tax-exempt qualifying certificate expired; however, this was partially offset by decreased net commission expenses due to large fronting business accounts in recent years. First Net reported favourable underwriting performance in 2020 and the first half of 2021 primarily due to reduced auto claims amid the COVID-19 pandemic. AM Best expects auto claims to rebound as traffic levels gradually return to normal over the coming years.

First Net is a domestic property and casualty insurer in the small and competitive Guam market, with a market share of approximately 4%, based on 2019 direct written premium (excluding group accident and health). Given its location and geographic concentration, AM Best views the company’s business expansion opportunities as limited and highly dependent on local economic development. Nonetheless, the company has a stable business stream sourced through Moylan’s Insurance Underwriters, Inc., its affiliated company and a major multi-line insurance agency with a strong distribution network in Guam and nearby jurisdictions.

Negative rating actions could occur if First Net’s risk-adjusted capitalisation or absolute capital and surplus declines substantially. Negative rating actions could also occur if there is sustained and significant deterioration in its operating performance, for example, due to a series of large losses or an increased expense ratio.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.



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